The USD/CHF currency pair saw a gain for the second consecutive session, trading around 0.8550 during European trading hours on Thursday. The U.S. Dollar (USD) has been buoyed by rising Treasury yields, which have continued to climb for the second day in a row.
The U.S. Dollar Index (DXY), which gauges the USD’s performance against six major currencies, extended its winning streak to five days. The DXY was trading near 101.80, with the 2-year and 10-year U.S. Treasury yields at 3.67% and 3.65%, respectively.
The recent uptick in USD/CHF can also be linked to expectations of a modest Federal Reserve interest rate cut in September. Data from August’s U.S. Consumer Price Index (CPI) revealed that headline inflation had decreased to a three-year low, enhancing the prospects of a 25-basis point rate cut by the Fed.
The U.S. CPI fell to 2.5% year-on-year in August, down from 2.9% in the previous reading and below the anticipated 2.6%. On a monthly basis, CPI rose by 0.2%. Core CPI, excluding food and energy, held steady at 3.2% year-on-year, while monthly core CPI increased to 0.3% from 0.2%.
In contrast, the yield on the 10-year Swiss government bond dropped below 0.4%, hitting a three-week low. This decline, coupled with the Swiss Franc (CHF) reaching its highest level of 2024, has fueled speculation that the Swiss National Bank (SNB) may implement a significant rate cut later this year.
Swiss inflation fell to 1.1% in August, which has further intensified speculation of a rate cut by the SNB. The market anticipates a 25-basis point reduction in September, with a total of 55 basis points of easing expected by the end of the year.
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